Political Divide and the Composition of Households’ Equity Portfolios

58 Pages Posted: 10 Mar 2023

See all articles by Yihui Pan

Yihui Pan

University of Utah - Department of Finance

Elena Pikulina

Finance Division, Sauder School of Business, University of British Columbia (UBC)

Stephan Siegel

University of Washington - Michael G. Foster School of Business; CESifo

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: March 7, 2023

Abstract

We examine the differences in the stock holdings of wealthy households in different counties of the U.S. with different political preferences over the past 25 years. Al- though political differences between counties have been increasing since at least 1996, it is not until 2013 when they started to increasingly and significantly contribute to differences in equity portfolio composition. Using the entry of a major conservative media network as a shock to county-level political preferences, we find evidence for a causal effect of political differences. We show that the effect of political differences on portfolio differences operates mainly through diverging political views on social and environmental issues rather than differences in economic expectations. Our study suggests that political polarization could reduce risk sharing and segment U.S. equity markets by political lines and – given the partisan segregation – geographical lines.

Keywords: Political preference, political polarization, equity portfolio composition, ESG

JEL Classification: G11, G41, G50

Suggested Citation

Pan, Yihui and Pikulina, Elena and Siegel, Stephan and Wang, Tracy Yue, Political Divide and the Composition of Households’ Equity Portfolios (March 7, 2023). Available at SSRN: https://ssrn.com/abstract=4381330 or http://dx.doi.org/10.2139/ssrn.4381330

Yihui Pan (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Elena Pikulina

Finance Division, Sauder School of Business, University of British Columbia (UBC) ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
6048223314 (Phone)

HOME PAGE: http://epikulina.com

Stephan Siegel

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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